It’s happening again.
The all-too-familiar story.
The politicians on Capitol Hill are playing their games, while the average American is suffering.
It makes you wonder who they’re really serving.
But I suppose trusting politicians to solve any problems but their own has always been wishful thinking.
Alas, as there is little we can do to expedite the decision-making process in Washington, let’s instead look at how we can best prepare our portfolios for the upcoming second coronavirus stimulus bill.
Nothing Is So Permanent As A Temporary Government Program
When the Democrats and the Republicans finally come to an agreement, which I expect to happen within days, the effect on the stock market will be the same as always—it will push values higher.
We are talking about $1 to $2 trillion. That’s an insane amount of money.
Let me just stop and say here that the way we throw these trillions around today makes me think long and hard about the value of the dollar. We are printing these vast numbers of them out of nothing.
But the stock market seems to like this, and, for the past 11 years, the more we’ve printed, the higher it has risen.
This ongoing central bank experiment is ludicrous, but let’s set that aside. As CNBC’s Guy Adami likes to say, “You can either be right, or you can make money.”
Of course, there’s another side to this coin. A no-deal outcome would send stocks reeling. I think there’s almost no chance of that happening, but we could still see some pullback if there’s a longer-than-expected delay in agreeing to a second stimulus package.
I would like that pullback to be at least 20%. That would make me a buyer. However, a 2% to 3% decline is more likely. This is insignificant and doesn’t call for any specific action.
All that said, I wouldn’t be focused on the stock market right now. You have better trading options in the current environment.
One of them is precious metals.
How To Profit From Any Scenario
I like trades that can make me money in any outcome.
Let’s take the most important upcoming event in the markets right now, for example—the second coronavirus stimulus bill.
If it is rejected, then political and economic uncertainty increases. This would drive investors away from stocks and into haven assets, such as precious metals. Meaning it would be a win for gold and silver.
On the other hand, if the bill passes, then we’ve just agreed to print another $1 or $2 trillion out of thin air.
This will further devalue the currency in circulation, aka create more inflation, even though the Fed wants you to believe it won’t.
Because the global supplies of gold and silver are limited, the value of these metals tends to appreciate when inflation picks up—and that is what will happen when the bill passes. There’s a reason why gold has been hitting new all-time-highs—it’s all the money-printing of the last few months.
In June, I considered whether gold might reach $3,000 per ounce this year. I suggested a target price of $2,200, which I see now was too conservative. We’re almost there a little more than a month later.
In any case, if you’re interested in understanding more about the factors behind the price of gold, I suggest you take a minute to reread that report. Taking another look at that piece will also remind you how much the investing world can change in a matter of weeks. You can access the article by following this link.
I also wrote another article on three ways you can invest in gold without having to buy bullion and hide it under your mattress. You can read about those here.
Finally, considering silver, it’s been on an absolute tear this year, rising 150% since the March lows. I wrote a piece on it last Friday, detailing how far it could go in 2020 and beyond. You can read that one here.
The New Bitcoin Bull Market
Another investment that is limited in quantity and that I like in the current environment is Bitcoin.
Obviously, cryptocurrencies are a novel asset class and much more volatile than precious metals.
Nonetheless, fundamentals have been improving in that space, and, in July, Bitcoin entered a new bull market for the first time in three years.
Furthermore, the fact that many people are using their stimulus checks for stock speculation using investment apps like Robin Hood suggests to me that they could well be moving to cryptocurrencies next.
With Congress getting close to reaching a new stimulus deal, the next leg higher for Bitcoin could be just around the corner.
I just finished writing a special report on Bitcoin last week, which you can read in full in the latest issue of my True Retirement Wealth.